'This is war': Iran feels impact of sanctions

Iran is being hit by a "war" on its economy, according to officials facing tightened US sanctions and renewed Israeli threats of imminent military action over Tehran's nuclear activities, AFP reports.

"This is war," Ayatollah Ahmad Janati, the hardline chief of Iran's influential Guardians Council, said as he led Friday prayers in Tehran.

Iran needs to mobilise "the nation, government, officials and armed forces" to tackle its "special and serious economic problems" which went beyond the global economic malaise, he said.

"We should prepare and break this wave (of economic pressure). We should not surrender," he said.

Janati said officials under the supervision of Iran's supreme leader Ayatollah Ali Khamenei were tackling the crisis, and he urged national media to avoid "pessimistic" stories and instead focus on news that "make people happy, hopeful and boost their morale."

The United States ramped up sanctions this week with a congressional measure to punish companies doing business with Iran's energy and oil shipping sector, and an order by President Barack Obama targeting Iran's oil exports and one Chinese and one Iraqi bank alleged to be fronting Iranian banking transactions.

Existing Western sanctions, especially an EU embargo, are already taking their toll, nearly halving Iran crude sales, according to an International Energy Agency estimate.

China, the biggest buyer of oil still exported, has lashed out at the new US sanctions.

But Obama's spokesman said on Wednesday that while the sanctions are having "a significant effect," Iran had "yet to make the choice it needs to make, which is to abandon its nuclear weapons ambitions."

The United States alleges Iran is seeking to develop a nuclear weapon "break-out" capacity.

Netanyahu told visiting US Defence Secretary Leon Panetta on Wednesday: "However forceful our statements, they have not convinced Iran that we are serious about stopping them."

He noted that sanctions, and deadlocked negotiations between Iran and world powers, have not had "any impact on Iran's nuclear weapons program."

Khamenei last week underlined that, under the Western pressure, "not only will we not revise our calculations, but we will continue on our path with greater confidence."

President Mahmoud Ahmadinejad confirmed that when he said Iran had 11,000 uranium enrichment centrifuges operating -- hundreds more than reported in a May 25 report by the UN's International Atomic Energy Agency.

Sanctions pain

But signs of the impact of sanctions are piling up.

Iran's currency, the rial, is trading at over 20,000 to the dollar -- around half of what it was worth a year ago.

Abbas Memarnejad, the head of Iran's Customs Organisation, was quoted on the website of state broadcaster IRINN as saying that imports have fallen seven percent in the past four months to 17.3 billion dollars, while non-oil exports had plummeted 16 percent to 12 billion dollars.

Iranian media have shown images of long lines of people waiting to buy subsidised chicken, after prices for the fowl have nearly tripled in the past year because of accelerating inflation.

A closed-door meeting of top Iranian government officials and lawmakers last week agreed to budget cuts as part of a strategy to mitigate the sanctions' effects, according to Economy Minister Shamseddin Hosseini, speaking to the official news agency IRNA.

Iran's central bank chief Mahmoud Bahmani -- who also described the sanctions as "no less than military war" -- said on Tuesday that a special sanctions-management cell had been set up in the bank that met daily.

"In times of sanctions, we need to carry out asymmetrical economic warfare, which we have begun," he said, according to IRNA.

Leaders have said that Iran should start weaning itself off its dependence on oil exports.

Ahmadinejad said on Tuesday that "we should move towards stopping crude exports," echoing Khamenei, who called Iran's reliance on selling crude a "trap" inherited from before the country's 1979 Islamic revolution.

Khamenei has ordered Iran to establish a "resistance economy" marked by greater self-reliance and oriented towards building knowledge and skills.